Time names Ben Bernanke person of the year for 2009

Magazine credits Fed chairman with avoiding the next Great Depression

KateGibson

NEW YORK (MarketWatch) -- Time magazine on Wednesday named Federal Reserve Chairman Ben Bernanke its person of the year for 2009, saying the story of the year -- the weak economy -- could have been far worse if not for the mild-mannered academic.

"We've rarely had such a perfect revision of the cliché that those who do not learn from history are doomed to repeat it," Time's managing editor Richard Stengel wrote in an editor's letter, noting Bernanke had once written that the Great Depression could have been avoided if the Fed hadn't taken some of the actions it did back in the 1930s.

"Bernanke didn't just learn from history; he wrote it himself and was damned if he was going to repeat it," wrote Stengel.

The accolade may boost Bernanke's standing on Capitol Hill. The Senate Banking Committee is expected to vote Thursday on Bernanke's nomination to a second four-year term.

The 56-year-old Bernanke has come under intense criticism from senators on the far-right and far-left but does enjoy the support of the broad middle of the political spectrum. Read commentary on Bernanke.

"I think he's done a great job navigating a very difficult situation," said Owen Fitzpatrick, head of the U.S. equity group at Deutsche Bank.

"He was facing a Depression," said Fitzpatrick, who credits Bernanke with being very creative and as a result, opening up a lot of markets.

Analysts think Bernanke will be approved by the Banking Committee and then the full Senate to a second term, but many senators up for re-election next fall are expected to oppose him.

The Fed has become the whipping boy on Capitol Hill for the financial crisis.

The central bank faces serious challenges from lawmakers who want greater oversight over monetary policy deliberations and others who want to strip the central bank of its vast oversight responsibilities over the nation's biggest banks.

Many analysts say the latter reform has a good chance of success.

The Fed's unpopularity has come despite something of a charm offensive by Bernanke. He was the first Fed chairman to appear on an interview for 60 Minutes and was even filmed strolling through his hometown of Dillon, S.C.

In an interview with Time, Bernanke said he decided to speak "directly to the public" after surveys showed "a lot of fear and uncertainty" in the public after the financial sector froze up last fall, causing the economic recession to deepen.

But Bernanke remains largely under-wraps and avoids tough questions about the collapse of Lehman Brothers and the disappearance of all U.S. large broker-dealers almost overnight.

Time was able to trumpet its interview with Bernanke as "the first full, on-the-record print interview with Bernanke since he became Chairman of the Federal Reserve" in 2005.

In the interview, Bernanke stuck to the script that the actions taken by the small group of policy makers including the Fed chairman, Treasury Secretary Henry Paulson and then New York Fed president Timothy Geithner pulled the economy and the financial sector back from the brink of collapse. He provided no details about the decisions taken during the crisis -- for instance to allow Lehman Brothers to fail and then to rescue American International Group. -- that have puzzled experts ever since.

Bernanke did take a mild swipe at Wall Street bankers, saying in the interview that the highly paid executives should "look in the mirror and decide that perhaps there should be more restraint in how much they pay themselves, given what the government and the taxpayer did to protect the system."

But this is a far cry from far-reaching reform proposals coming from overseas.

For instance, Mervyn King, the head of the Bank of England, has said it would be a good idea to separate bank's hot-house proprietary trading businesses from the traditional banking institutions that make loans and take deposits.

In addition, Britain has slapped a one-time 50% tax on individual banker bonuses of more than 25,000 pounds ($40,500).

Time credited Bernanke for his non-partisan approach to the crisis.

A scholar of the Great Depression, Bernanke is well versed in how the passive Fed of the 1930s helped create a crisis by refusing to expand the money supply and by "its tragic lack of imagination and experimentation," Time said.

So, when trouble in the U.S. housing markets morphed into the worst global financial crisis in more than 75 years, Time said Bernanke "conjured up trillions of new dollars and blasted them into the economy. He didn't just reshape U.S. monetary policy; he led an effort to save the world economy."

Time credited Bernanke with helping ensure that 2009 was a period of weak recovery rather than a catastrophic depression.

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